TORONTO (miningweekly.com) – Amidst writedowns, a drop in commodity prices and lower revenues, gold, silver and copper were among the most closely watched metals in the mining sector. They were also some of the hardest hit metals in 2013, according to professional services firm PwC's new ‘Gold, silver and copper’ report.
PwC on Monday said gold had been the big mining story of the year. The metal, which reached $1 900/oz in 2011, fell to about $1 200/oz in mid-2013 and prices were currently hovering not far above that.
Silver was declared the worst performing metal this year, and saw prices plummet 40%. As for copper, prices fell from $3.70/lb at the start of the year to above $3/lb currently – making it the metal that 'outperformed' this year.
The yearly report, which included copper and silver companies from a cross-section of the more than 100 senior, midtier and junior companies, had found that gold producers were preparing for another challenging year. Reflecting lower levels of confidence, 47% of gold producers expected the price to increase in the next 12 months, compared to 88% a year ago.
Despite being the worst performing metal this year, silver miners were optimistic about 2014, with only 9% expecting the silver price to fall further next year. Copper was expected to be stable with nearly two-thirds of respondents (62%) predicting copper prices to remain the same in 2014.
CUTTING BACK AND KEEPING COSTS DOWN
“After years of spending on mergers and acquisitions (M&A) and expanding operations with money generated from high metal prices, miners are now cutting back. Encouraging investors to return to the mining space will involve strict cost management strategies and responsible investment in production growth,” PwC global and Canadian mining leader John Gravelle said.
Managing costs and finding financing were among the top priorities for miners amid less optimistic future price expectations. According to the report, 66% of mining companies cited managing their spending as one of the most important business imperatives in 2014.
More than half (54%) of miners said that raising financing was critical and less than a quarter (20%) of respondents highlighted that M&A was something they planned to pursue.
For the coming year, 53% of miners said they expected going to the equity markets to raise capital, while 29% expect to raise project financing and another 14% planned to raise corporate debt.
"While 2013 has been a tough year for miners, the industry has faith that fundamentals will recover. Gold, silver and copper may not reach record levels in the near future, but expect prices to increase alongside the stabilising global economy,” Gravelle said.
He added that China's economic growth was expected to remain strong as it executed its reform agenda – providing hope for mining companies that continued to sell their commodities to the world's second-largest economy. The gradual economic recovery in the US could also help increase long-term demand for commodities,” Gravelle said.